Lets first address financial management. The theory behind maintaining a set of "books" is not unlike our client's "chart." The "books" are accounting records that document where a business has been (D: data), allowing for an analysis (A: assessment) to base informed decisions on for the business, and to help formulate projections (P: plan) for the next year's budget. Try to think of your accounting records as just another, albeit rather big, "DAP" note.

Before you head for your computer here's my first suggestion in support of simplicity, turn the computer off and for the first year do it by hand. I suggest that you use a packaged product, which is available commercially from a variety of vendors, generally known as a "one write" system. The "system" includes blank checks that conveniently fit into a special binder or holder supplied with the "system." In addition to the checks there is a ledger or tally sheet that is placed under the checks. It lines up in such a way that when you write a check, a record of it is transferred by carbon paper onto the ledger, becoming a permanent entry into your "accounting system." Although many accountants will recommend that you use double entry bookkeeping with a general ledger, your start-up private practice will get by easily with a "one write" system.

Those of you who have drifted through an Accounting 101 class may be familiar with the term, "Chart of Accounts," categories that record how you've spent your money. An example of accounts for a simple private practice may be: Rent, Utilities, Office Supplies, Professional Insurances, Professional Development, Clinical Supervision, Fees and Association Memberships, Licensing and Certification, etc. To begin with, one needs to go for a few basic categories and they can be modified as you gain a better sense of your actual needs. Now, here's the ultimate simplicity of a "one write" system. When you write a check, and you know it's for "Office Supplies," then it needs to be posted in an "Office Supplies" line item, and all of that whole process is on the ledger page attached to the folder. You write the check and post the whole or part of its total into the column that has been assigned an account title, such as your "Office Supplies." At the end of the month you add up all the Chart of Accounts columns and the result is your business expenses for that month.

Your deposits (income) into the checking account are also documented and when you add and subtract these totals you have your net income. Immediately you are able to tell how wonderful your practice is doing. (Please always emphasize "wonderful" because the mind-set for a solo practitioner must always be one of abundance and not one of scarcity.) At the end of the year you do the same with your monthly totals and you're ready to compile your tax reports. For all practical purposes you are now doing an important portion of the accounting for your business.

You do, of course, have to open a checking account for your business because you must keep the business separate from your personal financial activities. Do not pay any personal bills from the business account, or any business bills from your personal account. The IRS and other government agencies will scrutinize you more carefully if they find that you are mixing business with personal. The IRS has the option to disallow all disbursements as personal expenditures unless you can prove otherwise, and you certainly want to reduce your income for tax purposes by deducting your business expenses. Deposit all of your practice income into that one account, and only your practice income. This simplifies substantiating what your total income before expenses has been for the year. Save all your deposit receipts, their total is your gross income.

If a simple manual accounting system challenges your technology paradigm, by all means, go ahead and do your accounting on the computer. There are many excellent software packages available for accounting and there are also ones that are specially formulated to support a counseling practice business. These will also help you with client billing and accounts receivables. Initially it's easiest to use software that has been designed for personal financial management. A very popular and easy-to-use program is Quicken 2001 and also Quicken 2001 Home & Business. If you need something more powerful, look at their small business accounting software package called QuickBooks.

Lindsay E. Freese, MEd, MAC, LADC, is associate professor of Human Service at the New Hampshire Community Technical College located in Concord, NH. Over the past 20 years he has worked in private practice and both clinically and administratively in residential programs. He is past president of the New Hampshire Alcoholism and Drug Abuse Counselor Association.